Rio Tinto's chief executive Tom Albanese faced a harrowing time defending the $19-5 billion Chinalco deal at the dual-listed company's annual general meeting in London yesterday as shareholders demanded why the company was applying a long-term strategic solution to a short-term financing problem.

Addressing about 300 British shareholders, Albanese defended the deal saying that it would insure Rio against an uncertain global economy while shareholders said that the asset and share sale was like selling the family silver to Chinalco.

Both Albanese and Rio Tinto chairman, Paul Skinner, faced a continuous barrage from angry shareholders, for rejecting the $147-billion BHP Billiton takeover bid to the resignation of chairman-elect Jim Leng who had disapproved the method of raising funds to meet the company's debt repayment and the Chinalco deal.

Angry British institutional shareholders, who comprise 80 per cent of the company's shareholder register, remained opposed to the Chinaclo deal and demanded why the board did not come out with a rights issue to solve the company's debt problem.

To repay this debt, Rio Tinto created a strategic partnership with China's state-owned Aluminium Corporation of China (Chinalco), under which the Chinese company would invest $19.5 billion for Rio Tinto's mining assets as well as double its stake from the present 9 per cent to 18 per cent.

Chairman-elect Jim Leng, who resigned from the company over differences with the Rio board on the the company's plans to raise funds to settle its debt, had said that there was no need to look for a long-term strategic solution to a short-term financing problem. (See: Corus chairman quits Rio Tinto's board; rules out joining it)

The shareholders also said that they would not let the deal go through since Rio had not been prepared to accept BHP Billiton's takeover offer worth over $147 billion during the cyclical upswing (See: BHP Billiton raises offer for Rio Tinto to $147 billion) but was now prepared to sell some of its best assets to Chinalco at bottom of the market prices.

Albanese said that the Chinalco deal would help Rio Tinto in exploring for minerals in China as well as gain access to Chinese financial institutions for funding future development projects globally.

He also said that the deal would also make Rio a major player in China as well as the developing world, where Rio could in partnership with Chinalco could undertake research, project development and exploration in emerging economies.

Albanese sounded confident that the Chinalco deal would be passed by the Australian regulators and said that the company was committed to successfully navigating the regulatory processes before putting it to a shareholder vote.

Analysts, however, feel that the Rio Tinto board is not as confident of asucessful shareholder vote since it has lined up a 'Plan B', for a, $8-billion rights issue if the Chinalco deal is turned down by the Australian government. (See: Rio Tinto mulls $8 billion rights issue as 'Plan B')

The miner has also raised $3.5 in fixed-term bonds on the open market in case if the Chinalco deal is scuttled.

Paul Skinner said that the company now regretted the Alcan acquisition but the views of the shareholders would be brought to the notice of Chinalco as he felt that it was the company's intention of reflecting the views of the shareholders to the Chinese investor.

Both Albanese and Paul Skinner will now have to face Rio's Australian shareholders at the annual meeting in Sydney on Monday, 20 April.